Specific-Shares Method

Specific-Shares Method
A personal financial accounting method that, when used properly, can help reduce capital gains realized for an investor who purchased multiple sets of a stock or mutual fund. In turn, the investor's total tax paid in a given tax year is also reduced. In order to use the specific-shares method, the investor needs to keep careful records - particularly the cost basis - of each stock or mutual fund purchase. Then he/she must provide detailed information on which particular shares are to be sold to the broker managing the investor's account.

Here's an example:

An investor purchases 50 shares of Company XYZ at a price of $30 per share on June 15, 2001. A year later, the shares of Company XYZ have depreciated in value to $10 per share, so the investor decides to purchase 60 more shares. Two years after that, the value of Company XYZ shares have appreciated in price to $90 per share.

The investor decides to sell 50 of her shares and realize a profit, but still hold onto the rest as she expects Company XYZ shares to continue to rising in price.

Using the specific-shares method to minimize the gains realized on her sale of XYZ, the investor calls her broker and asks him specifically to sell the 50 shares of Company XYZ that were purchased on June 15, 2001. These shares were more expensive, so the capital gain realization is minimized: the cost basis of these shares is $1,500 ($30*50 shares), so the investor realizes a capital gain of $3,000 ($90*50 shares - $1,500). If the investor had sold 50 of the shares she purchased at $10 per share - which would have a cost basis of $500 ($10*50), she would be liable for a capital gain of $4,000 ($90*50 - $500).


Investment dictionary. . 2012.

Игры ⚽ Нужно сделать НИР?

Look at other dictionaries:

  • Specific Identification Inventory Valuation Method — A method of keeping track of all items in an inventory. Specific identification inventory valuation is often used for larger items such as furniture or vehicles, but it is used to identify specific securities as well. This method of… …   Investment dictionary

  • Collaborative method — Collaborative methods are processes, behaviors and conversations that relate to collaboration between individuals.[1] These methods specifically aim to increase the success of teams as they engage in collaborative problem solving. Forms, rubrics …   Wikipedia

  • A block of shares — Block Block (bl[o^]k), n. [OE. blok; cf. F. bloc (fr. OHG.), D. & Dan. blok, Sw. & G. block, OHG. bloch. There is also an OHG. bloch, biloh; bi by + the same root as that of E. lock. Cf. {Block}, v. t., {Blockade}, and see {Lock}.] [1913 Webster] …   The Collaborative International Dictionary of English

  • South African contract law — is essentially a modernised version of the Roman Dutch law of contract, [1] which is itself rooted in Roman law. In the broadest definition, a contract is an agreement entered into by two or more parties with the serious intention of creating a… …   Wikipedia

  • withholding tax — A method of implementing the pay as you go system of paying income tax on wages and salaries, employers being required to withhold a portion of each salary or wage payment due an employee and turn it over to the government, the employee taking… …   Ballentine's law dictionary

  • Business valuation — is a process and a set of procedures used to estimate the economic value of an owner’s interest in a business. Valuation is used by financial market participants to determine the price they are willing to pay or receive to consummate a sale of a… …   Wikipedia

  • Capital gains tax in Australia — Capital Gains Tax (CGT) in Australia applies to the capital gain made on disposal of any asset, except for specific exemptions. The most significant exemption is the family home. Rollover provisions apply to some disposals, one of the most… …   Wikipedia

  • ECONOMIC AFFAIRS — THE PRE MANDATE (LATE OTTOMAN) PERIOD Geography and Borders In September 1923 a new political entity was formally recognized by the international community. Palestine, or Ereẓ Israel as Jews have continued to refer to it for 2,000 years,… …   Encyclopedia of Judaism

  • Computers and Information Systems — ▪ 2009 Introduction Smartphone: The New Computer.       The market for the smartphone in reality a handheld computer for Web browsing, e mail, music, and video that was integrated with a cellular telephone continued to grow in 2008. According to… …   Universalium

  • India — /in dee euh/, n. 1. Hindi, Bharat. a republic in S Asia: a union comprising 25 states and 7 union territories; formerly a British colony; gained independence Aug. 15, 1947; became a republic within the Commonwealth of Nations Jan. 26, 1950.… …   Universalium

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”